Portfolio Investment Bulletin – Summer 2017

This publication provides an overview of portfolio investment activity within the UK commercial real estate market. It provides an analysis of key trends, a breakdown of the main buyers and sellers across all sectors and a detailed outlook of what to expect during 2017.

Key themes

Volumes remained steady, helped in part by c.£700m of overhang deals from Q4 2016 which transacted during H1 2017. At the end of H1 the portfolio market sprung to life with c.£5.5bn either being marketed or prepped for sale.

Alternatives remain the dominant sector accounting for 36% of deals, as investors continue to diversify and look for secure long dated income. Student housing stands out as a significant sub sector accounting for 65% of volumes.

Business Space and mixed portfolios accounted for 43% by volume (c.£2bn) with key deals including the Ultrabox Portfolio, Arlington Business Parks, Project Apple and Project Sea. We have seen a number of industrial portfolios launched in the last six weeks with investors seeking to capitalise on the continued strong demand for this sector.

Private equity remains the dominant buyer with 42% of acquisitions in 2017. Conversely some PE vehicles have started to crystallise returns through divestment strategies, accounting for nearly half of sales so far this year, compared with 20% in 2016.

The prevalence of restricted marketing continues with 70% of all business space and mixed portfolio deals transacted with restricted marketing or through off market transactions. 75% of the £2.5bn of deals advised by Gerald Eve over the last 12 months have been transacted in the shadows.

Transaction timescales continue to be extended, with deals generally taking twice as long to execute compared to the bull run of 2015. Transaction diligence continues to be rigorous with no stone left unturned.